Nov. 21, 2019, 4:26 a.m.(UTC)
It seems that almost everyone wants to open a Coffee Shop. And why not? Imagine walking into your store daily to pick up your bag of money - the barista smiling as he brews while the smell of fresh roast and sounds of happy customers delight your senses. Coffee must be a great way to fill your pockets with money - right? Today we're going to take a critical look at opening a coffee shop on Franchise City.
Coffee is another business that carries a lot of emotional momentum. It's kind of the go-to retirement dream or, a business that is the exact opposite of the rat race. No board meetings, no fighting traffic, no stress and no pressure. Or so they think.
So let's get that misconception out of the way first. Owning a coffee shop is operationally no different from most service based food businesses. You'll be dealing with employee theft, spoilage, sourcing issues, high attrition levels and ongoing difficulty in finding quality employees at reasonable hourly rates. It is not rare to see new owners putting in 80 hour workweeks to try and make things happen. if you think there is no pressure running a coffee shop try a vision of payroll coming up tomorrow as well as your rent and you are once again $2800 in the red with no way of paying. Your best selling coffee roast is on back order, your manager just quit, the washroom is plugged again and you just got 4 bad reviews because your washroom is plugged again.
In the coffee business you'll also be at the mercy of very "passionate" customer sentiment. This industry has a fickle and demanding customer base who expect you to be better than their last shop. You will be very hard hit if any of your employees give bad service, or if your coffee is not up to these very high standards of local coffee drinkers. If you receive enough bad online reviews when you first open it can literally turn your coffee shop into a ghost town. Social media has a massive impact on buyer decisions these days and you have to ask yourself are you, as a new entrepreneur savvy enough to understand how to train your staff in great customer service? Because it doesnt just happen. Are you able to source coffee and to have it prepared in such a fashion it blows customers away? Can you source it at rates low enough to make money?
And here is the problem with most prospective coffee shop investors. They have no idea about coffee, no idea about customer service. They just noticed a local coffee shop is often busy and see this as a quick way to make money. If money is your primary focus, and you have no previous skills in food service or customer service this can actually be a very difficult business to operate despite the glorious visions you have in your mind.
Now even if you do happen to have a handle on good coffee, a good handle on running a business and hiring and managing employees the industry itself right now is still tough.
In fact Starbucks, arguably the most successful coffee brand in the world, will be closing 150 stores this year. That's three times as many as it usually closes. Do you hear that? 3 times more than it usually closes. Closing stores is an ongoing, regular event with Starbucks. Closing stores - not opening stores.
A quick search for "coffee shop closed" reveals hundreds of these results, local shops all over the country closing their doors for various reasons, mostly monetary. This owner was quoted as saying "The business hasn't made itself sustainable yet and it's been almost 3 years. Can you imagine struggling for 3 years only to have to close the doors? Prospective investors should take time to click through some of these stories, most of these independent shops were trendy, cool, had pretty solid reviews. Everything was in place and yet they had to close down. Some had been open for up to 30 years.
If we do a search at BizBuySell -which is a listing website for selling businesses we see there are almost 1200 coffee shops and cafes for sale. Are they selling because they are making too much money? Let's take a look. We see locations for sale at $15,000, $19,000, $20,000 with seller financing.
Tim Hortons, arguably the most successful Canadian coffee shop, had owners recently hit with a $250,000 reduction in annual earnings just due to minimum wage increases. Tim Horton's is also seemingly struggling with their rollout and expansion into the US market and even they are closing stores.
There are many businesses and franchise options out there - not just coffee, don't let your emotions guide you as always do your research in a critical fashion. If you are considering the franchise route and need help finding a franchise give the experts a call at franchise city. Our services are free to qualified buyers you can learn more about us here. Dont forget to like and subscribe and hit the bell for updates.